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Economics

Powerful Microscope or Willful Blindness

The current President said:

job losses have diminished substantially since the depths of the recession when the economy was hemorrhaging jobs a rate of 700,000 a month.

"It is true that we, as a country, are in a very different place than we were when 2009 began," Obama said, saying there was evidence of a "positive trend" in the November employment report released on Friday.

Here’s what he’s accomplished in his first year:

Graph of Private Wage Jobs Obama Highlighted

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Here’s $4 Trillion, Just to Tide You Over

The headlines say the worst is over. The $700B TARP program, for example, stabilized the financial industry.

How does this square with that picture?

Hunkering down by the fire, I snuggled up with H.R. 4173, the financial-reform legislation passed earlier this month by the House of Representatives.

It authorizes Federal Reserve banks to provide as much as $4 trillion in emergency funding the next time Wall Street crashes. So much for “no-more-bailouts” talk.

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Policy by Playskool

Good craftsmanship depends on good tools. The orthodox conception of economics holds that government can craft better outcomes than we would have if the rabble were left to their own devices.

Tools can be divided into two broad classes: working tools and measuring tools. First (and second, if you follow the maxim) the craftsman must measure. Then he cuts. Without good measurements, the quality of the working tools and the skill of the craftsman are moot.

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The Scrooge Fallacy

My latest hero, Ebenezer Scrooge, is an example of a pervasive fallacy:

The widespread notion that free markets are corrupting is rooted at least in part in the innocent truism that for the market to work people must act according to self-interest. Without the motivation of self-interest, there would be no profit seeking, no price competition, no production and exchange. True enough, the market requires self-interested behavior.

But many make an illogical leap from this truism to a falsehood: that if one is self-interested, one cannot be other-interested. Many see an either/or choice. Scrooge can care about Scrooge, or he can care about others: the poor, his clerk Bob Cratchit, Cratchit’s family, including lame Tiny Tim, and so on. He cannot do both.

Where Unicorns Grow

Lefties, Greenies, and the current President tout a new “green” economy as a solution to today’s dysfunction. Escaping the carbon cycle will save the polar bears. Eliminating fossil fuels will clear the air and cut the legs out from under “evil regimes” that “don’t like us very much”.

We’re being manipulated and coerced into spending huge sums of borrowed money on a raft of unproven ideas aimed at taking the U.S. toward a vision of blue skies and unicorns.

It sounds beautiful. Until you look into the details behind the technology that will drive the Clean Energy Economy:

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Pay No Attention to What’s Behind the TARP

Keeping in form, the Failed Obama Administration™ touts benefits while ignoring costs:

Both Obama and the Treasury Department keep talking up the TARP as if it is a money maker for taxpayers, when nothing could be further from the truth. Obama tried this stunt in his anniversary of Lehman speech, and the Treasury continues with the theme, of implying that results for the firms that paid back are representative of what the final results would be.

If this logic were generally true, that would mean subprime bonds were a good investment too. After all, most borrowers did make good on their mortgages. A late September Moodys mortgage survey that a reader sent me estimated that total losses on subprime RMBS will be about 26%, which means that 74% were money good.

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Next Float in the Parade of Lies: Government Motors

Recall that the FOA™ promised it wasn’t going to interfere with GM’s operations. More lies:

The WSJ reports:

Starting Jan. 4, General Motors Co. plans to do something unprecedented in the U.S. car industry: It will run its assembly line here around the clock on a permanent basis.

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No Tears for Tuvalu

From the center ring at the Globalistical Warmening circus in Copenhagen:

Tuvalu, a Pacific island state politically and financially close to Australia, proposed a new protocol which would have the advantage of potentially forcing deeper global emission cuts, but could lead to other developing countries - rather than rich nations - having to make those cuts.

Many developing nations cherish the legally binding commitments that Kyoto places on industrialised nations and fiercely oppose proposals that would change this.

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Shadow Unemployment

The headline-making unemployment figure (currently 10.0%) is only one of several measures for unemployment. What we hear is called the U3 statistic. There is also a U6 statistic:

This isn’t a third-rate tribute band, it’s the underemployment rate, and it tracks people who work part-time, and people who’ve given up looking for work altogether. This rate is currently at 17.5%.

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Meet WIET

My previous comment on employment data was back in August. In the intervening months, the unemployment rate—a favorite for headline-makers—grew to double-digits. Now the November data is out, and blowhards of every stripe are jousting over the meaning of the first drop in that measure in a couple of years.

It’s all gas.

The unemployment rate is dependent upon too many variables and subject to too much manipulation for my tastes. I look at employment, not unemployment. What we really care about is how many people are adding value to our economy. And how much.

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Revealed Preference

The non-customer is always right.

Quoted from: TJIC

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Come Look at Both of Our Buildings!

Detroit gets all the attention as America’s signature urban failure. But let’s not forget Cleveland:

H/T: Maggie’s Farm

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Politics Problem

I regularly mention the illusion of false scarcity. My line usually goes something like, “It’s not a resource problem, it’s a technology problem. The best example is oil. Should Earth ever actually release all its oil for human consumption, any of the several substitues already known could be a viable replacement. Or something new will be found. If we put our minds to it.

What happens when the technology works too well? In Belgium and around the world, milk prices have dropped very low. At the current price, supply exceeds demand. In other words, for $4 per gallon, farmers will make more milk than people are willing to shell out $4 for.

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The African Executioner

Over the past year I bought two new sets of tires made in China. I chose Chinese-made tires because they were significantly cheaper than other tires. Internet reviews assured me they would perform as well as more expensive ones. Mine have.

Now, the current President wants to deprive all Americans of the opportunity to get good tires at a great price:

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Labor Fires Union

Government is not the only democracy in the USA. Labor unions, for example, are structured around the concept of majority rule.

All democracies are at risk of becoming tyrannies. Either by force of majority ignoring minority interests, or by insiders and operatives who work the system to their advantage over the interests of those they’re supposed to represent.

Workers at a Boeing factory in South Carolina decided that their union was no longer working for them. By secret ballot, laborers fired the union:

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You Are Evil Thieving Bastards

A Bank of America customer fires the first shot in a debtors’ revolt:

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Rick Steves’ Guide to Government Cheese

Thinking up this introduction, I was amazed to find that PBS is not on the list of Stuff White People Like. Public Radio, however, is #44.

Now, on to the point. Art Carden starts from common ground and has a suggestion to shave a wisp off the Federal budget:

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“Government” is the Antonym of “Choice”

Legislators make laws, but seem fond of disregarding laws of nature. I mock their hubristic disregard by calling such silliness Anti-Gravity Legislation. Imagine how many unicorns we could have if gravity were cut by 20%. Let’s propose a law!

Sheldon Richman takes the proposers to task:

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Uncle Sugar Pays Really Well

Government employees are pretty much all lefty, and mostly union. Teachers, AFSCME, SEIU, cops, firefighters, [add to the list APWU] are all organized and active in maximizing their share of everyone else’s income. And they’re darn good at it:

In 2008, the average wage for 1.9 million federal civilian workers was $79,197, which compared to an average $49,935 for the nation’s 108 million private sector workers (measured in full-time equivalents).

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New Economy Costs 10% More than Old Economy

Canada is forging ahead in the race to build a new green sustainable economy. And they’re paying for it:

Hydro One is seeking permission from the Ontario Energy Board to raise the delivery portion of hydro bills in Ontario by 9.5% in 2010 and 13.3% in 2011, in an attempt to raise over 250 million dollars to cover increased distribution costs. Much of that cost is tied to its Green Energy Plan for 2010-2014.

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